FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., November 9, 2018. REUTERS/Andrew Kelly

Low unemployment, the continued benefits of the Republican-led corporate tax cuts, and concerns of a protracted economic slowdown in Europe should result in U.S. equities remaining the best-performing world market, investors said at the Reuters Global Investment 2019 Outlook Summit in New York this week. U.S. stocks have already outperformed other markets this year at a clip that is the best in nearly five years.

“From the growth differential perspective, even though the U.S. is now slowing, the rest is slowing more sharply. So most other stock markets will probably suffer more than the U.S.,” said Joachim Fels, global economic adviser at Pacific Investment Management Co.

U.S. corporate profits are expected to grow by 10.8 percent in 2019, compared with a 23.7 percent increase in 2018, according to global markets research at FTSE Russell, as the boost from the corporate tax cuts begins to fade.

That compares to earnings growth of 10.4 percent in 2019 for European companies excluding the UK, 16 percent next year for emerging markets companies, and 4.9 percent for Japanese companies, according to FTSE Russell.

The U.S. economy is expected to grow by 2.5 percent next year, according to estimates from the Federal Reserve. By comparison, the economy of the euro zone is expected to grow by 1.9 percent next year, down from previous forecasts of 2 percent, the European Commission said on Nov. 8. [L8N1XJ46G]

“The U.S. has been the lodestar in terms of corporate profits,” said Richard Bernstein, chief executive of Richard Bernstein Advisors LLC.

The U.S. benchmark S&P 500 index is up 1 percent so far this year, compared with an 11.5 percent drop for an exchange-traded fund designed to measure equity market performance outside the United States (ACWX.O). If that 12.5 percentage point difference holds for the year, it would be the largest annual outperformance for U.S. stocks since a 19-point difference in 2014, according to Refinitiv data.

The October selloff in the U.S. stock market, which erased what had been a nearly 10 percent rise in the Dow Jones Industrial Average for the year-to-date, could leave the U.S. stock market poised for gains in the year ahead, said Byron Wien, vice chairman at Blackstone Advisory Partners.

“The U.S. market was very fully priced in September, and so the fact that we have had a severe correction which is continuing is understandable, but it is moving into an attractive range,” he said.

At the same time, he added, emerging markets may offer more compelling valuations, even if the United States continues to outperform. “My view is that’s where the real values are, and I would do some nibbling there,” he said.

Indeed, the U.S. stock market is more expensive than international equities, based on price-to-earnings ratios. The S&P 500 is trading at 15.6 times earnings estimates for the next 12 months compared with 12.6 times for Europe’s Stoxx index and 10 times for the MSCI emerging markets index, according to Refinitiv data.

Citron Research’s Andrew Left, a prominent short-seller who has published critical reports on Chinese companies and profited when their shares dropped, said he finds some Chinese companies more attractive than their U.S. counterparts.

“There is value in China,” Left said. “I would take Alibaba (BABA.N) all-day-long over Amazon (AMZN.O).”

Many stocks have declined due to concerns about the fallout from the expanding trade war between the United States and China, Left said, even though trade friction between Washington and Beijing could take less of a toll than many expect because domestic demand in China is growing so rapidly that exports will matter less to its economy.

Kera Van Valen, a portfolio manager at Epoch Investment Partners, said she expects global stock market volatility to continue, potentially leaving the U.S. stock market as a safety trade.

“There is more uncertainty in the markets today than two years ago,” she said. “I do think that there are continued challenges outside of the U.S. while the U.S. economy continues to improve.”

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Reporting by David Randall and Lewis Krauskopf; Editing by Leslie Adler